From April 2025, several significant updates will impact how businesses operate, report their finances, and manage their tax obligations. Let’s break down all the key updates – from business classifications to tax rates and National Insurance – in plain English, no accounting degree required! Let’s get ready for what’s coming.
One of the most significant changes that will take effect for accounting periods beginning on or after April 6, 2025 is the significant increase in company size thresholds. The Companies (Accounts and Reports, Amendment and Transitional Provision) Regulations 2024 will increase the monetary thresholds for micro, small and medium-sized enterprises by approximately 50% – the first such increase since 2013.
To qualify for a specific category, your business needs to meet at least two of these three criteria:
Company size category | Turnover | Balance sheet total | Average employees |
Micro-entities | ≤ £1 million | ≤ £500,000 | ≤ 10 |
Small companies | ≤ £15 million | ≤ £7.5 million | ≤ 50 |
Medium-sized companies | ≤ £54 million | ≤ £27 million | ≤ 250 |
This is huge! About 133,000 businesses will drop into lower categories:
The Benefits Are Real
Dropping to a lower category means:
For example, a company moving from small to micro-entity status might save £2,000-£5,000 annually on accountancy fees, while a company no longer requiring an audit could save £5,000-£15,000+ depending on its size and complexity.
These savings represent a meaningful reduction in the administrative burden for thousands of UK businesses, freeing up resources that can be reinvested in growth, innovation, or competitiveness.
The best part? There’s a special provision that lets you act like these new thresholds were already in place last year, so you can start benefiting right away!
This statement refers to the “transitional provisions” included in the new legislation. Let me explain what this means in practical terms:
Normally, when qualifying for a different company size category, a business would need to meet the criteria for two consecutive financial years before being able to use the reporting advantages of their new category. This is sometimes called the “two-year rule.”
However, the special transitional provision in this legislation allows companies to pretend that the new higher thresholds were already in effect for the previous financial year (2024-2025). Here’s why this matters:
For example, if your company has a turnover of £14 million, under the old thresholds you would be classified as a medium-sized company. With the new thresholds raising the small company limit to £15 million, you can immediately be treated as a small company for your next reporting period, without having to wait to satisfy the usual two-year requirement.
This provision essentially accelerates the benefits of the threshold changes by a full year for many businesses.
Want the official details? Check out the Financial Reporting Council (FRC) website.
In conjunction with the revised company size thresholds, the new rules also simplify the requirements for directors’ reports. Beginning with reports filed on or after April 6, 2025 (for fiscal years beginning on or after April 6, 2024), things will be simpler for large and mid-sized companies. The government is cutting out a bunch of duplicate and low-value requirements from Directors’ Reports.
The UK is removing eight reporting requirements that have either been replaced by better reporting methods or simply didn’t add much value. Here’s what you no longer need to include:
These changes are a real win for business! You’ll spend less time preparing redundant information and more time focusing on meaningful disclosures. Your directors’ report will be more concise and relevant without losing any valuable information (it will still be reported elsewhere).
Remember, these changes come into effect on April 6, 2025, so you can look forward to simpler reporting for your next financial year.
Firstly, let’s understand what Employment Allowance is: it’s basically a discount on the employer’s National Insurance Contributions (NICs) you pay for your employees. It was created to encourage small businesses to take on people by reducing their costs.
The Employment Allowance, which allows eligible employers to reduce their annual NICs, will undergo significant changes from April 2025:
Increased allowance amount: The Employment Allowance has increased from £5,000 to £10,500 per year, representing a significant increase in this employer relief.
Removal of the eligibility limit: The £100,000 employer threshold for Class 1 NICs, which restricted eligibility, has been removed. This change extends the benefit to many businesses that were previously excluded from claiming the relief.
Key Points to Remember about Employment Allowance:
– You can claim it if you have employees (not yourself)
– It covers your employer’s NICs up to £10,500
– It’s particularly valuable for small businesses with a few employees
– You generally can’t claim it if the only employee is a director
– You usually need at least one other employee besides the director
– Once eligible, it applies to NICs for all employees, including the director
– You need to actively claim it – it’s not automatic
– You claim it through your payroll software
– The allowance is per business, not per employee
The doubled allowance and expanded eligibility criteria will provide additional financial support to many businesses, potentially freeing up resources for investment or operational needs. Read in details here on the gov.uk site.
The 2025 tax year brings significant changes to National Insurance Contributions that will impact both employers and employees:
These adjustments, particularly the reduced secondary threshold combined with the increased rate, will result in higher National Insurance costs for most employers.
Workers will benefit from the following National Minimum Wage increases:
These changes represent substantial increases, particularly for younger workers and apprentices, with the 18-20 age bracket seeing a 16.3% rise.
Statutory payment rates will also increase:
Statutory Sick Pay: Increased from £116.75 to £118.75 per week
The thresholds at which student loan repayments begin will rise:
These adjustments will provide some relief to graduates by slightly raising the earnings threshold before repayments commence.
The employer NIC relief for hiring qualifying veterans has been extended until 5 April 2026. Employers remain exempt from NICs on a veteran’s first year of civilian employment, up to an annual salary of £50,270.
If you’re a resident of the United Kingdom, under the previous rules, you would typically pay tax on your foreign income. However, there was an opportunity to avoid taxation if your permanent home (“domicile”) was outside the UK. This “non-domicile” status allowed UK residents to be exempt from tax on income earned abroad, provided those funds were not brought into the UK (the “remittance basis”). This made it possible to avoid paying UK tax on overseas earnings as long as the income remained outside of Great Britain.
That was the case until recently. But from 6 April 2025, significant changes have come into effect.
The UK government aims to eliminate unfairness in the tax system so that everyone who resides in the UK long-term pays their taxes here. To achieve this, the outdated concept of domicile status has been removed from the tax system, and a new regime has been introduced. This new system is designed to be internationally competitive and focused on attracting top talent and investment to the UK.
From 6 April 2025, the preferential tax treatment based on domicile status for all new foreign income and gains (FIG) is no longer applicable. Instead, a new tax regime based on residency duration in the UK has been implemented, replacing the concept of domicile. This new regime is called the “4-year foreign income and gains (FIG) regime”.
Replacing the remittance basis of taxation, the government is introducing an internationally competitive, residency-based regime that provides a full 100% exemption from tax on FIG for new UK residents for their first four tax years of residency, provided they were not tax resident in the UK for any of the 10 consecutive tax years preceding their arrival in the country.
In summary:
From 6 April 2025, the outdated concept of domicile (non-dom) has been officially removed from the UK tax system. A new system based on the duration of residence in the UK has been introduced. New arrivals to the UK who meet the criteria (not having been tax resident for the 10 previous years) will receive a full 4-year exemption from taxation on their foreign income and gains, regardless of whether these funds are brought into the UK.
These changes represent a significant step in reforming the UK tax system and will have important consequences for many foreign residents.
Several changes to Capital Gains Tax (CGT) rates come into effect from 6 April 2025:
These increases are part of broader tax-raising measures intended to increase revenue from asset disposals.
In details about BARD read in the our article .
Several changes to creative industries tax reliefs will apply from 1 April 2025:
These measures provide more certainty and enhanced support for the UK’s creative sector.
HMRC will begin contacting relevant taxpayers from April 2025 about Making Tax Digital for Income Tax Self Assessment (MTD for ITSA), which will be implemented in phases:
Under MTD for ITSA, eligible taxpayers will need to:
Businesses should start preparing well in advance by exploring compatible software options and considering how to adapt their record-keeping processes.
For official eligibility information, visit: GOV.UK Making Tax Digital for Income Tax
These changes might seem overwhelming at first, but many of them can actually save you money and make running your business easier. The key is getting prepared early and asking for help when you need it.
Got questions? Worried about how these changes affect your specific business? Give us a call or drop us an email. We’re here to help you navigate these changes without the headache!
Remember: Your job is to be brilliant at what you do – whether that’s making the best coffee in town, fixing cars, or designing websites. Our job is to help you handle the tax stuff so you can focus on what you do best.
Disclaimer: This is a simplified explanation that should not be considered professional tax or legal advice. Always check gov.uk for the latest information.
